T HE I R K I G A T I X AGE. 



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most impossible to finance an irrigation scheme by the sale 

 of its securities. And that brings us to consider that in the 

 final analysis, the persons most interested in the success of 

 irrigation are those who buy and hold irrigation bonds and 

 those who buy and use the water rights developed thereby. 

 Bankers and constructors must both consider these interests 

 if enterprises are to be successful. 



And now what are the essentials to success in the develop- 

 ment and construction of an irrigation poject? I am talking 

 broadly of the whole subject without regard to whether the 

 projects are to built by the nation, states, local districts or 

 private enterprise under any of the forms of irrigation or- 

 ganization. These are important details, but they are details 

 only. And in this connection I will say that I was for some 

 years connected with the federal Reclamation Service; have 

 been consulted and employed by Carey Act and private enter- 

 prises, and have a fairly representative acquaintance among 

 those now engaged in irrigation development by means of all 

 these forms of organization, so that what I have to say will 

 be drawn from experiences with and directed towards the 

 needs of all rather than any particular situation. 



As I see it, success in irrigation development may rest 

 on many and varying things, but in every case it requires 

 first, control of a sufficient water supply so distributed by 

 nature or controlled by man-built works that it can be de- 

 pended upon when needed for growing crops ; second, control 

 of an area of cultivable land so located that it is practicable 

 to apply to it the water controlled; third, engineering works 

 so designed and constructed that they will bring the water to 

 the land as needed ; fourth, efficient and economical manage- 

 ment in the conduct of the varied phases of the work whether 

 promotion, financing, engineering, construction or operation. 



That good accounting will wonderfully help in securing 

 these essentials or in disclosing the lack of them is my firm 

 belief, and my reason for accepting an invitation to address 

 you at this time. 



To determine the sufficiency of the water supply is a work 

 for hydrographers and engineers, but the accounts should 

 disclose the extent to which work of this kind is or is not 

 being done, thereby enabling managers and the financing in- 

 terests to call for the results of such work if done or to 

 insist upon its being undertaken if omitted or insufficiently 

 carried on. 



A proper scheme of accounts will do a similar work as 

 to the second and third essentials; namely, the irrigable area 

 and the engineering design. Accounting will not pass judg- 

 ment upon the effectiveness of work done in any one of these 

 phases of the development, but it will disclose its presence or 

 absence, and by proportion will show the degree of importance 

 which is being given thereto by the responsible management. 

 These three essentials involve consideration of physical con- 

 ditions in the light of special technical knowledge, and while 

 I believe all will agree that at times there have. been serious 

 lapses from the highest professional standards, yet it is a 

 cause for congratulation that to such a large degree the 

 engineering profession is actuated by the finest of professional 

 principles and possessed of an excellent technical equipment. 



We have said that the fourth essential is efficient and 

 economical management in the conduct of the varied phases 

 of the work. This is the special field for accounting. Here 

 it is at home. It can and should be made to disclose the 

 financial status of the enterprise and whether it is improving 

 or growing worse. It can show what methods are economical 

 and what are wasteful. It can be made to assist in conserving 

 the miscellaneous small property of the concern as well as 

 to record its larger holdings. It will offer a means of com- 



paring men doing similar work and will give a basis for the 

 consideration of the effectiveness of various kinds of ma- 

 chinery in construction work. It will develop construction 

 costs which will be a guide in estimating for further similar 

 work. It will give a basis for commercial credits to worthy 

 undertakings, which they cannot reasonably expect without its 

 aid. It can, in short, be made a positive help in every line of 

 work, and when generally adopted in its best development by 

 the irrigation enterprises most worthy of confidence, will give 

 such enterprises an unquestionable advantage over those which 

 are unwilling to enlist its assistance and give its results to the 

 interested public. 



There is not time now to discuss the fine points of a 

 scheme of accounts adapted to the needs of irrigation. More- 

 over, the system must of necessity be devised with a special 

 reference to the conditions of each enterprise. One will re- 

 quire what is unnecessary to another. Townsite development, 

 generation of power for sale, dealing in agricultural lands, 

 merchandising, transportation, hotel keeping, etc., are fre- 

 quently associated with irrigation development, and when 

 thus connected should have provided therefor accounting 

 methods of the most modern and progressive types. But 

 there are phases which are common to all irrigation develop- 

 ment which should be carefully reflected in the accounts and 

 for which standard forms of reports should be adopted in 

 order to secure the best results. 



I think we will get the most out of this study, if we 

 divide irrigation costs into those for financing, for engineer- 

 ing, for construction, for selling, for operation and for gen- 

 eral expenses. Cost statements should show the totals for a 

 given period and to date for each class. But these costs 

 should be analyzed further to show the expense upon different 

 classes of work and upon different physical features. The 

 percentage of engineering expense, for example, will properly 

 be greater upon a masonry structure of involved design than 

 upon a simple earthwork. A company may sell its water 

 rights partly by employing a regular land selling agency and 

 partly by its own sales organization, and should be able to 

 know the costs and results of each method. 



Moreover, there should be adopted uniform methods of 

 stating the asset and liability accounts, particularly those which 

 are peculiar to the business of irrigation. While the experi- 

 ence of other lines of industry will help in deciding such 

 questions, there are some which must be studied probably for 

 the first time. One such problem is that of the proper treat- 

 ment of the right to the control of certain water supplies ob- 

 tained by appropriation from the states, and which it is 

 proposed to sell in the form of water rights. Should such 

 controlled but wholly or partly undeveloped water supplies 

 be shown in the accounts as assets? Again, when water 

 rights are sold before the completion of a project should the 

 estimated construction cost of these particular water rights 

 be deducted from the scale prices and the excess carried to 

 the credit of the loss and gain account as profit before the 

 actual construction cost is determined, and probably when 

 only a small fraction of the sale price has been collected? 

 If this is new to you, it probably sounds academic and theo- 

 retical, but upon the answer to this latter question rests the 

 determination of whether such unliquidated, and to a degree 

 problematic profits, are subject to the federal corporation tax, 

 and when. Here, as often, theory goes ahead and points the 

 way to practice. 



You will note that I am contending for a standardization 

 of accounts, as well as for the accounting per se. There is a 

 reason for this, and one which should appeal strongly to 

 those who are directing irrigation enterprises. It is not an 



